Government Misses the Mark with IR35 Review Plans

The government has announced plans to honour its election pledge and conduct a review of the controversial off-payroll working reform (IR35) in the private sector. In a written statement released Tuesday 7 January, the government said that the review would:

• explore the necessary steps that should be taken to “ensure the smooth and successful implementation of the reforms”
• assess if any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.

The review will consist of six small stakeholder roundtables at HMRC’s London offices within the coming weeks. The announcement’s confirmation that the review will focus solely on implementation, is perhaps the biggest signal from government that it plans to go ahead with the reforms in 2020.

The UK labour market has withstood tough times however it’s resilience should not be taken for granted. Pushing ahead with tax legislation without a considerable review of its impact could severely damage the market. The loan charge scandal last year showed us what happens when badly designed legislation is implemented without a meaningful review.

Whilst we are pleased that the government has given clarity on the review, we believe there is more that can be done to reassure business.

• Tackle legislation not just implementation. There are a number of changes that have been made to the private sector reforms which were not present in the original public sector reform. Any planned review of the reforms should also assess the potential impact of these new features, such as the small business exemption.
• Allow for more stakeholder engagement. While it is encouraging that government has opened another avenue for businesses to feed their ideas into, holding it in London excludes many stakeholders who will be impacted. Furthermore, given the lack of notice for stakeholders to attend the roundtable, it is likely that many stakeholders may not be able to attend given that they are busy preparing for implementation.
• Allow an independent chair to review. An independent review into the reforms would enhance the legitimacy of the government’s position and help build business confidence.

The REC will be attending the government’s stakeholder roundtable next month as part of the review. We will also be targeting backbench MPs as part of our public affairs activities. A full summary of our position on IR35 can be found on the IR35 hub. If you want to lobby your local MP concerning the review, please do get in touch with Ornella Nsio for information and support.